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Kirkland's (KIRK) Beats on Q4 Earnings; Gives FY17 View

Japamala jmukhopadhyay

Kirkland's, Inc. KIRK surpassed estimates again in fourth-quarter fiscal 2016, after posting a massive positive surprise of 50% in third-quarter fiscal 2016. The company reported earnings of 83 cents per share that beat the Zacks Consensus Estimate of 80 cents by 3.7%. However, the quarterly earnings of 97 cents per share incurred a year ago were lower by 7.2%.

Quarter in Detail

The home decor retailer’s net sales increased 2.1% year over year to $203.2 million, driven by strong online sales. Weak pre-holiday traffic in December was partially mitigated by strong Black Friday and post-holiday sales.

Kirkland's, Inc. Price, Consensus and EPS Surprise


Kirkland's, Inc. Price, Consensus and EPS Surprise | Kirkland's, Inc. Quote

Categories like seasonal assortment performed decently during the quarter. Sales came almost in line with the Zacks Consensus Estimate during the quarter.

Including online sales, comparable store sales declined 4.6% compared with an increase of 1.3% registered in the prior-year period.

Gross profit decreased 1.6% to $79.2 million due to higher cost of sales. Operating income declined 14% $22.9 million owing to lower-store supplies, marketing costs and corporate related expenses.

Kirkland's opened four stores and closed one during the fiscal fourth quarter, taking the total number of stores to 404 at the end of the quarter.

Other Financial Details

The company exited the quarter with cash and cash equivalents of $63.9 million compared with $28.3 million in the previous quarter. Deferred rent and other long-term liabilities were $61.41 million compared with $62.91 million in the previous quarter.

Fiscal 2017 Guidance

Kirkland’s anticipates fiscal 2017 earnings per share in the range of 50–65 cents. The company expects earnings to be lower in the first half of the fiscal year.

The company predicts sales to increase 6–8%. The guidance reflects the additional week in the retail calendar for fiscal 2017.  This sales guidance assumes comparable store sales in the range of slightly negative to slightly positive excluding the impact of the additional week of sales.

The company intends to inaugurate 25 to 30 new stores and intends to close 20 stores in fiscal 2017. The company targets to achieve 2–3% square footage during the year.

The company expects to incur capital expenditures of approximately $23 million compared with $27 million in fiscal 2017, primarily driven by new store openings along with continued investments in omni-channel and supply chain initiatives.

Zacks Rank & Stocks to Consider

Kirkland’s carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the retail sector are Burlington Stores Inc. BURL, Genesco Inc. GCO and At Home Group Inc. HOME, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Burlington Stores has an expected earnings growth of 19.9%, Genesco and At Home has an expected earnings growth rate of 9.5% and 25%, respectively.

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At Home Group Inc. (HOME): Free Stock Analysis Report
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